NAO report into managing government suppliers gives Cabinet Office a mixed review

We mentioned last week that the National Audit Office (NAO) has issued two reports on strategic suppliers to the UK government. The one we will discuss today, “Managing government suppliers”, covers work the Cabinet Office (CO)is doing to manage those major suppliers. It covers the 40 strategic suppliers identified by CO, with whom central government spends some £10 Billion a year.

Since 2012, CO has renegotiated key contracts with these suppliers, developed the “Crown Commercial Representative” concept (senior people who take the relationship lead with these suppliers), introduced spending controls, and put in place some performance management processes.

It is a very mixed report as far as CO performance and success goes. Credit is given for extracting better value from the suppliers - £2 Billion (cumulative) savings reported over three years, although this is impossible to verify. CO has also “sent signals that government is willing to be tough on underperformance”, which is absolutely true and a noteworthy  achievement for Bill Crothers, the government CPO and the team generally.  (There is a lot more in the report on how supplier performance management is working, but we’ll save that for another time).

However, there is a significant list of issues and cautions identified by NAO. Firstly, there is “significant tension between the Cabinet Office and departments”. A statement of the blindingly obvious, we might say, and perhaps inevitable when we have seen Cabinet Office making the biggest centralising power-grab in government for 30 years or more. But NAO get more specific, with very sensible suggestions like this:

“To achieve its ambitions, the Cabinet Office will need to have clearer accountability with departments for its own performance. Clarifying the operating model for the centre and departments will also allow departments to determine how their own commercial functions should operate.”

Secondly, NAO point out something we’ve mentioned more than once here. The CO strategy is based on short-term savings, which could actually “pose a risk to value of money in the longer term”.

There is a balance to be struck between tough negotiations and maintaining relationships with suppliers in the longer term. Unless the risks are understood and mitigated, this may have implications for competitiveness in certain markets if it leads to suppliers exiting areas of public sector business, or deters new entrants".

And finally, NAO picks up on the resources, capability and information needed to deliver the programme and sustainable benefits. Here, they really are quite critical. CO could only provide NAO with data for 24 of the 40 suppliers and  “...information and knowledge on this group of suppliers is inconsistent and incomplete, and scaling up this approach in future will require greater discipline”.

It is most unusual for NAO to report on the process of doing their reviews – so this is notable. “During the course of this audit, the Cabinet Office took a considerable amount of time to locate a number of historical documents, such as CRB minutes and supporting briefing papers”.

The CRB is supposed to be a key governance group in this process, we should explain. Reading the report, it looks like the programme has been a bit of an administrative shambles really (my words, not the NAOs, I should say).

But more strategically worrying, there seems to have been little or nothing in the way of operating models or governance of the CCRs’ activities.

“... there are some basic expectations which could be standard such as a minimum frequency of contact, and a consistent role in the controls process. Without clear terms of reference for the role, clear accountability for their actions, and formalised objectives, it is difficult to measure benefits and be sure that they are achieving their potential.”

There does at times appear to be a believe that getting “top business people” involved will, in itself, solve all the problems , when clearly it doesn’t. And apparently now there are four of the external CCRs left – we knew that David Jephson had stood down, but another has obviously gone. (We don’t know who but I’m sure someone can tell us - it’s funny how CO made a big thing when these guys were appointed, but are very quiet when they go).

So, we can summarise by saying that some good and innovative work has been delivered. But better discipline, controls and skills are needed to drive the programme further, and more thought about the long-term goals and methodology (rather than just a short-term cost reduction focus) is needed for the strategic relationship management. A fascinating report anyway, highly recommended for anyone interested in public procurement.

Voices (6)

  1. Bill Atthetill:

    Some insights on Capita….

    http://ukcampaign4change.com/2013/11/13/capita-an-nao-insight/

  2. Effwhitt:

    Having watched yesterdays PAC it’s clear that the process is flawed. How a disgruntled “entrepreneur” can lobby to the point of seeding their self-serving issues centrally into a subject of such import is beyond me.

    And it gives real, competent, hard-working SME’s a bad name…

    But then to allow two Salesmen to polish their “petard” to the detriment of Senior, accomplished, procurement professionals with out-of-context and inaccurate brick-bats is shameful…

  3. Dave Orr:

    The Cabinet Office is responsible for transparency and accountability across all of Government, yet they do not respond to Freedom of Information (FOI) requests themselves, without a great deal of chasing and threats of escalation to the Information Commissioners Office.

    Many FOIs appear to be ignored:

    https://www.whatdotheyknow.com/body/cabinet_office

    In my case, it is a UK Government response to the EU on an issue raised via my letter to my MEP and his directly related enquiry to the EU Competition Directorate – yet I am being denied access!

    Peter: Why not pop an FOI in on a related matter and see what happens?

  4. Midfield Captain:

    Dear Peter and Bill atH,

    I thank you both equally for your analysis and insight on this article and the many others you have published and commented upon, respectively.

  5. John Diffenthal:

    2.8 onwards discusses performance management and 2.10 mentions that things are going OK with 73% of the strategic supplier contracts measured as green. Aside from the question of what is happening to the 27% which are performing at below green, this paragraph is beyond parody because the underlying data in the performance analysis comes from … the suppliers themselves. Given that the SFO is currently investigating 2 of these strategic suppliers for alleged data manipulation and over-invoicing even the writers of this report can’t regard that as a stable data source.

  6. Bill Atthetill:

    I’ve read the report, but let’s pick up a few of your (helpful) statements Peter, specifically:

    “CO could only provide NAO with data for 24 of the 40 suppliers and …information and knowledge on this group of suppliers is inconsistent and incomplete, and scaling up this approach in future will require greater discipline”. (Whoops! We’ve been told that it all starts with data and intelligence…?)

    “…..the Cabinet Office took a considerable amount of time to locate a number of historical documents, such as CRB minutes and supporting briefing papers”. (dear oh dear….surely, this is the most ‘basic’ aspect of contract management!)

    “Reading the report, it looks like the programme has been a bit of an administrative shambles….” (understatement of the year – what have these crown reps been doing with government’s largest and most critial suppliers for the last 3 years – that’s the problem with ‘top business people’ – they don’t like doing paperwork….)

    It’s remarkable that Bill Crothers continues to openly refer to Commercial Directors and their procurement teams within central government departments as being fundamentally crap, and yet he’s built, and is now sitting upon, this self-made giant (expensive) petard. (Let’s hope the NAO has lit the fuse.) He continues to criticise the existing procurement community and yet his own backyard (as we all know) is a shambles – the fact that he was a salesman for 20 years (before falling into procurement – as he tells everyone…) has given him the ideal set of competencies in his current role, and he utilises his ‘sales-spin’ (firm promises, but variable delivery) with senior individuals across government. The NAO should take a closer look – there’s very little content in his significant empire and ‘Napoleon’ (like his historical namesake) is clearly fighting far too many battles on far too many fronts….. Could this be the reason why the launch date of the new Crown Commercial Service has been put back several months? (It was supposed to be launched in October remember.) Who knows. Perhaps, it’s just a ‘wrinkle’ in an otherwise well-thought-through strategy and implementation plan….

    Let’s see if any of the MPs pick up on all of this at the PAC, today at 15.15 (live, online, on Parliament TV). One must always stick to the facts at the PAC and it will be interesting to see how many supplementary ‘notes’ Mr Richard Bacon asks for when he realises that he’s not getting the answers that he seeks….

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